Over the next six months, JSE-listed Protech Khuthele would focus on its strategic markets and leveraging its businesses to enable it to deliver an increase in earnings per share and return on equity, CEO Antony Page said on Monday.

Protech on Monday posted an operating profit of R22.3-million for the six months ended August 31, down 30% on the R32.2-million operating profit recorded in the first half of the prior financial year, mainly owing to R13-million in costs incurred during construction group Eqstra’s bid to buy out the shares in Protech it did not already own.

Protech stated that, given that Eqstra’s offer had lapsed at the end of July, similar costs would not likely be incurred in the second half of the financial year.

Further, the civil engineering group reported a 6% increase in revenue for the six months to R561-million, compared with R531-million in the first half of the previous financial year.

Cash generated from operations declined to R31.2-million, from R111.8-million in the first half of the previous financial year, as a result of the repayment of advance payments, direct working capital funding of the GPS joint venture in the Democratic Republic of Congo and transaction costs incurred.

After the repayment of borrowings of R57-million, the group ended the period with a cash balance of R99-million.

“Given the trading market and other factors, such as problems in the mining sector, we are satisfied with the results,” Protech CEO Page told Engineering News Online, adding that the half-year results also reflected the substantial progress that had been made through its strategic turnaround strategy, which culminated in Protech’s improved profitability from a loss-making position in 2012.

The company indicated that it continued to make considerable progress in the implementation of its strategic turnaround strategy.

The group has now embarked on phase two of the turnaround plan, designed to build on the foundation established during phase one, as well as to turn the intelligence and analysis into tangible change through focused implementation projects. The change of strategy in three of the business units was expected to start delivering measurable and tangible results shortly, which should further improve the group’s profitability.

Meanwhile, the construction division remained Protech’s flagship business, contributing 86% and 97% to group revenue and profit respectively.

The readymix business contributed R74-million, or 13%, of revenue and R3-million of profit during the period under review. Value-add services contributed R14-million, or 1%, of revenue and R1-million of profit.

“The construction division experienced difficulties in securing work, owing, in part, to the decline in mining infrastructure spend. Turmoil in the South African mining sector and global economic uncertainty have made mining companies reluctant to invest in large capital projects, particularly in South Africa. Protech continues to selectively examine opportunities beyond South Africa’s borders,” Page said.

Further, during the six-month period, Protech was awarded contracts in the public sector, as well as the commercial and industrial segments, totalling R350-million.

“The current order book amounts to R1-billion, of which R230-million relates to contracts in final negotiation. The total qualifying pipeline is valued at R2.9-billion. This augurs well for the group’s 2014 prospects,” the company said.

Tenders submitted in the transport and commercial sectors increased during the period, which demonstrated Protech’s increased focus on government infrastructure.

“Our strategic market is our main focus at the moment. We want to take our product, or the work that we do, and move it to other local areas or markets that we have not traditionally operated in,” Page said.

In addition to this planned further expansion into South Africa and a focus on its clients, Protech would also concentrate internally on leveraging its own businesses, and adding to them, through organic growth and also possibly through acquisitions, he added.

Page concluded that, as the construction industry as a whole was suffering, the next six months were expected to be just as difficult as the previous period; however, the sector was expected to start performing better within the next 12 to 24 months.